Beginning in 1999, lending institutions have been required to cancel a borrower's Private Mortgage Insurance (PMI) when his mortgage balance (for a loan made after July of that year) reaches less than seventy-eight percent of the purchase price, but not when the loan's equity reaches more than twenty-two percent. (A number of "higher risk" loan programs are excluded.) But if your equity reaches 20% (regardless of the original price of purchase), you have the legal right to cancel your PMI (for a mortgage closed after July 1999).
Analyze your statements often. You'll want to keep track of the the purchase prices of the houses that sell in your neighborhood. You've been paying mostly interest if your mortgage loan closed fewer than 5 years ago, so your principal most likely hasn't lowered much.
At the point you find you have achieved at least 20 percent equity in your home, you can start the process of canceling your Private Mortgage Insurance. You will need to notify your mortgage lender that you wish to cancel PMI payments. Your lender will request documentation that your equity is high enough. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your home's equity and eligibility for canceling PMI.
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